XA Market Report | Jakarta Composite Index (JCI) — The Great Capital Market Reset And The Fallout

 

By Ezaridho Ibnutama & Graceline Melinda

02-Feb-2026

 

 

 

We are placing our rating for the Jakarta Composite Index (JCI) / Indeks Harga Saham Gabungan (IHSG) with an OVERWEIGHT. Our End Of Year Target will be maintained at the range of 9,600-9,800 due to the undervaluation of big caps—primarily KBMI IV Class Banks.

 

 

 

🔹 PART I : Current Condition in Indonesian Stock Market
Foreign Attraction Hanging By A Thread Capitulating Domestic Market Panic.

 

• Feb-2026 Rebalancing Halt. On 27-Jan-2026, MSCI announced it will halt all additions, deletions, and migrations for the Feb-2026 MSCI rebalancing on all its indexes.

 

• May-2026 Forthcoming Index Implementation Using KSEI Data. MSCI announced last year they will be calculating using free float based on KSEI data rather than publicly available data citing lack of transparency regarding institutional corporate as Ultimate Beneficiary Owner (UBO) for May-2026 Rebalancing.

 

 

 

🔹 PART II : Background to MCSI
An Emerging Market Under Threat Of Downgrade To Frontier Market

 

• A Minor Emerging Market Weighting. Indonesian equities weighting to MSCI ACWI at 0.13% as of 30-Sep-2025 translating to USD 5.07 bn. The additional outflow could also include from the separate Emerging Market Index funds and ETFs. Indonesia weighs a minor 1.2% to the overall ~ USD 1.2 tn AUM benchmarked to EM Index translating to ~ USD 14.4 bn. While we suspect partial overlap in AUM from the two separate MSCI Indices, we view a potential capital outflow of USD 6-9 bn.

 

• MSCI Indonesia Index Holds Feather Weight Capitalization In Global Exchanges. Indonesia’s Index Market Cap of USD 119.14 bn has a 0.114% (with only 18 constituents) when compared to MSCI Global ACWI IMI’s USD 104.21 tn. However, it is almost double the size of MSCI Vietnam’s Index Market Cap at USD 58.47 bn with almost quadruple (~3.83x) the number of constituents at 69. As of Dec-2025, Vietnam is the largest weighting in MSCI Frontier Market Index with 30.55%.

 

 

 

🔹 PART III : Cases of Classification Migration
• PAKISTAN : This was a technical downgrade, but it still forced investors to exit. The decision was mainly based on size and liquidity, not punishment, but funds with Emerging Market mandates had to exit, and frontier market inflows were not sufficient to replace those outflows.

 

• ARGENTINA: Policy control risk outweighed market fundamentals. Argentina’s equity market can operate domestically, but global investors with Emerging Market mandates cannot participate without reliable foreign exchange exit mechanisms.

 

• RUSSIA: Moscow Stock Exchange demonstrates the highest form of classification risk driven by legal investability. When trading and capital repatriation are blocked, MSCI effectively removes the market regardless of its size or liquidity.

 

• MOROCCO: The downgrade reflected a classification fit adjustment rather than policy punishment. Morocco’s market size and depth were assessed as more suitable for the Frontier Market peer group.

 

 

 

🔹 PART IV : IDX and OJK Potential Upcoming Reforms and Restructuring

Reforming From Top-Down

• Clearing Out The Deck Under New Management. President Director of IDX Iman Rachman resigned after MSCI publicly announced its consideration to re-classify Indonesia into a Frontiers Market. OJK Commissioners Board Chairman Mahendra Siregar have also resigned followed by Chief Executive of Capital Market, Financial Derivatives, and Carbon Exchange Supervision (PMDK) Inarno Djajadi and the Deputy Commissioner for Issuer Supervision, Securities Transactions, Special Audits, Financial Derivatives, and Carbon Exchange Supervision (DKTK) I.B. Aditya Jayaantara.

 

 

Danantara’s Further Hold Of The Domestic Stock Market

• IDX Planned For Demutualization. Coordinating Minister of Economics Airlangga Hartanto has espoused the potential demutualization of the Indonesia Stock Exchange; this means IDX will no longer be an entity moved by its members and policymakers, but it will be transformed into being owned by external shareholders.

 

• Danantara Eyes IDX Ownership Via IPO. CEO of Danantara Rosan Roeslani has stated that IDX is targeted to be more transparent by entering its shares through an Initial Public Offer (IPO) after the demutualization process.

 

• Raising The Ceiling For Equity. Finance Minister Purbaya Yudhi Sadewa has stated that Pensiun Funds (Dapen) and Insurance funds can increase their stock portions in their portfolio at a maximum of 20% from the current 8% in upcoming proposed Finance Ministerial decree; The MoF stated the increase of stock portion should be restricted in LQ45. BPJS-TK already had plans last year to raise its stock portion from 10-13% in 2025 to 20%–an estimated IDR 161.03 tn.

 

 

 

🔹 Rating JCI at an Overweight with an End of Year Target at 9,600-9,800
• We are placing our rating for the Jakarta Composite Index (JCI) / Indeks Harga Saham Gabungan (IHSG) with an OVERWEIGHT. Our End Of Year Target will be maintained at the range of 9,600-9,800 due to the undervaluation of big caps—primarily KBMI IV Class Banks (Exhibit 43-46). Despite turbulence from the recent debacle by MSCI’s statement to potentially downgrade Indonesia into a Frontier Market from an Emerging Market (potentially causing a USD 6-9 billion foreign outflow), we are of the opinion this is unlikely to happen because of the government’s current fiscal reform measures being implemented and planned for the Indonesian Stock Exchange (IDX) to increase transparency and liquidity for foreign capital. We also favor the Indonesian Equity Market due to Danantara’s potential stake ownership which may incentivize the sovereign wealth fund to boost-up liquidity—pension funds and insurance funds have already given the green light to increase equity portion to 20% in LQ45 stocks.

 

 

 

 

 

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NH Korindo Sekuritas Indonesia berizin dan diawasi Otoritas Jasa Keuangan (OJK). Untuk informasi lebih lanjut, anda dapat menghubuni CS kami via email CSO@nhsec.co.id